Electrolux AB

Good morning and a warm welcome to Electros Group's fourth quarter 2023 results presentation. With me today, I have our CFO, Therese Friberg, and for the final time, our Head of Investor Relations, Sofia Arneus. I'd like to mention that this session is recorded and will be available on our website as an on-demand version. For the full year 2023, challenging market conditions have continued to pressure profitability, most significantly in North America, but also to some extent in Europe and Asia-Pacific, while Latin America has performed very well in a more stable market environment than we have experienced in recent years in most countries there. Consumer demand was impacted by inflation and interest rates in most parts of the world, resulting in lower unit volumes. Overall, price remained a slightly positive factor for the calendar year, but increasing promotional activity progressively turned net price negative in the second half of the year. Specifically in North America, unit volume demand held up at relatively good levels, but only because of significantly reduced market transaction prices. We saw continued positive contribution from product mix as we focused on leveraging our attractive and innovative product offering, despite an overall negative market mix development as consumers increasingly looked for lower-priced products. The group-wide cost reduction and North America turnaround program delivered 5.5 billion sec of savings, but this was partially offset by negative external factors, primarily from currency, but also excess inflation and energy cost increases. Full-year EBIT of 0.4 billion SEC was not satisfactory and heavily impacted by a weak Q4 in North America, as previously communicated. Given the continued and accelerating headwinds, a further step up in our cost reduction measures was announced in the fall. Focus on organizational simplification and de-layering and strong focus on product cost reductions. So if we then move into the fourth quarter specifically, our performance in Q4 was heavily impacted by strong price pressure in North America, as well as temporary transition impacts from our new factory in Springfield. Overall volumes were slightly lower, as strong growth in Latin America offset weakness in North America, and soft but sequentially stable demand in Europe. And we continued to improve our sales mix. the significant loss in North America was mainly driven by price pressure, despite continued cost reduction performance. We also saw quite high promotional activity in Europe, impacting EBIT negatively there, while Latin America delivered strong organic growth and financial performance. As a consequence, we reported a loss of 724 million SEC before non-recurring items, and as previously communicated, we took a non-recurring item of 2.5 billion SEC in Q4 for the expanded cost reduction program. Therese will now walk us through the non-recurring items in Q4.

In the quarter, we had non-recurring items with impact across business areas and group common costs. 2.5 billion SEK in total was related to the cost reduction program with a regional charge reflecting country-specific legislation. And 0.2 billion SEK was related to the impairment of assets related to the organizational change. We also had a positive effect from the Memphis real estate sales as previously announced. And having clarified this, let's go into the results for the quarter. We had a negative organic contribution to earnings in the quarter, driven by negative effects from price and mix combined of 4.4 percentage points, with negative price in our main markets. Mix continued to be positive despite consumers mixing down based on a strong product portfolio. Volumes declined slightly in the quarter. Cost was in total reduced by 1.1 billion SEK with cost efficiency and innovation and marketing combined. This was somewhat lower than previous quarter related to that we already last year in the fourth quarter had implemented reduction in the use of express freight and spot buys of components. We also had a temporary transition cost related to the closure of the legacy factory in Springfield in the quarter. External factors turned positive in the fourth quarter driven by positive raw material. This was affecting currency headwinds and headwinds related to labor inflation and energy cost increases. And to improve transparency, the net impact on earnings from currency-related price increases in Argentina is from the fourth quarter included in external factors. Hence, both the negative currency effect and cost inflation, as well as the corresponding positive effect from price increases, And reported organic sales growth, however, includes price increases in Argentina. And if we take a quick look also at the full year. For the full year, we had negative organic contribution to earnings, driven by a significant volume decline as a result of large demand drops in our main markets, especially in, for us, important product categories. The positive effect from price and mix combined was 1.2 percentage points for the full year, with positive mix also for the full year. Price was positive in all business areas except for North America, where we have experienced large price pressure during the year. Also in Europe, price turned negative in the later part of the year. Cost was in total reduced by 5.5 billion SEK as a result of the focused execution of the cost reduction program, which we will come back to the different components of. External factors, despite being positive in the fourth quarter, was negative for the full year, driven primarily by currency, but also excess inflation and energy cost increases. And the group-wide cost reduction and North America turnaround program delivered savings exceeding target, and Jonas will now go

more into this thank you as mentioned we delivered cost reductions of 5.5 billion sec in 2023 well ahead of our initial target of 4 to 5 billion but behind slightly our revised ambitions of 6 billion due to ramp up issues in springfield and some other temporary headwinds in particular we were successful in reversing many of the inefficiencies built up during the pandemic and improved manufacturing productivity we also streamlined the organization and reduce the total of 9,000 positions from Q2 2022 to Q4 2023, from 53,000 employees to 44,000. As we go into 2024, we have the ambition to reduce an additional 4 to 5 billion SEC through organizational simplification, focus, productivity efforts, and ramp up and stabilization of Springfield, resulting in anticipated headcount reductions of 3,800. of which approximately 3,000 required the restructuring costs that were taken in Q4 2023. We have strong focus on material cost through sourcing activities and leveraging modularization and scale. We're also accelerating medium-term product cost reduction efforts to continue to drive similar productivity performance in the coming years. Let's have a look at our cash flow and liquidity series.